Why Canadian Millennials are beating their American peers in the race to home ownership

Less saddled with student debt and facing more favourable labour market conditions than their American peers, Canadian Millennials are faring better when it comes to homebuying.

Six months into 2015, more than half of Canadians born between 1980 and 2000 had purchased a home — and done so earlier in life than their parents — compared to 36 per cent of stateside Millennials who had accomplished that same feat, according to a TD Economics report released today.

The bank’s report explores the factors that have made homeownership a more attainable milestone for Canadian Millennials in recent years, particularly for those aged 25 to 34, underscoring the Great Recession’s varying effect on the two North American economies as an overarching factor.

“Less collateral damage from the 2008/2009 financial crisis has meant that Millennials in Canada have maintained better access to mortgage credit and stronger income gains, allowing them to enter homeownership earlier,” write Beata Caranci and Diana Petramala, the TD economists who authored the report.

Through the post-recession period, Canadians haven’t racked up as much student debt as Americans, which is helping them purchase homes more easily, the economists behind the report also noted.

The reasons for this are twofold, according to TD. Tuitions in the US have increased at a quicker rate than in Canada, and Americans are more likely to enrol in grad school or pursue professional degrees after earning a bachelor’s degree, driving up their education costs further.

The latter factor only intensified in the US during the recession, as some students prolonged entry into the workforce. “Pursuing higher education offered a better option than entering a weak employment market,” according to the report.

The report also suggests Canadian Millennials have benefitted from a trickle-down effect as their parents emerged from the financial crisis in better shape than their American counterparts.

While the US housing market has been slowly recovering since the Great Recession, homeowners in Canada have seen the national average home price close to double. “No doubt, some of this wealth and resulting financial wiggle room has been passed down to children,” said the TD economists in the report.

Looking forward, Caranci and Petramala expect Canadians aged 25 to 34 to continue to have better real estate prospects. “However, some closing of the gap appears likely,” they note. “Canada’s housing market expansion is now at a mature phase, with little scope for further gains in homeownership rates.”

And though a majority of Canadian Millennials have reached the ownership milestone faster than their parents, they have accrued more debt, resulting in their increased vulnerability to a housing market correction.

At the same time, American Millennials — the group behind about one in three US home purchases over the first half of this year — face markets at home that still have room to grow. “U.S. Millennials appear to enjoy more upside potential from strengthening housing and job markets, alongside comparatively high education levels,” according to the report.

“And, as the Canadian experience has shown, there is a strong inherent feedback loop between the rising wealth and spending gains of this large demographic group and the nation’s overall economic performance,” Caranci and Petramala conclude.